If you're reading this, you've probably been tasked with "figuring out headcount planning" for your company. Maybe you're a finance leader at a growing startup, an HR director building processes, or a founder who just realized your hiring is getting out of control. This guide will get you started.

What Is Headcount Planning?

At its core, headcount planning is answering three questions:

Who do we need to hire?
When do we need to hire them?
Can we afford it?

Simple questions. But getting them right determines whether you build the team you need or run out of money trying.

Why Headcount Planning Matters

Early-stage companies often skip formal headcount planning. When you're 10 people, everyone knows what's happening. But somewhere between 20 and 50 employees, chaos emerges:

Engineering hired 3 people while Finance thought they were only hiring 1
Budget is 20% over plan with half the year left
Sales needs 5 SDRs but there's no budget
Two departments made offers for the same salary band

Headcount planning prevents this chaos.

The Basic Framework

Here's the simplest version that actually works:

Step 1: Start with Revenue/Business Goals

Don't start with headcount. Start with what you're trying to achieve:

Revenue target: $10M to $20M
Customers: 100 to 300
Product launch: New marketplace product in Q3

Step 2: Translate Goals to Roles

For each goal, ask: "What roles do we need?"

$10M to $20M revenue = 3 sales reps + 1 sales manager
100 to 300 customers = 2 customer success managers
Marketplace launch = 2 engineers + 1 product manager

Step 3: Layer in Constraints

Now add reality:

Budget: We have $2M for new headcount this year
Hiring time: Engineers take 3 months to hire
Productivity: New sales reps take 3 months to ramp

Step 4: Sequence and Prioritize

You can't hire everyone at once. What comes first?

Q1: Hire 2 engineers (marketplace needs 6 months to build)
Q2: Hire 1 sales manager + 2 reps (need ramp time before H2)
Q3: Hire 1 PM + 1 CS manager
Q4: Hire 1 sales rep + 1 CS manager

Common Mistakes to Avoid

Mistake 1: Starting with Headcount, Not Goals

Wrong: "Let's hire 10 people this year"

Right: "To hit $20M revenue, we need these specific roles..."

Mistake 2: Forgetting Time-to-Hire

If you need a senior engineer in July, you need to start hiring in April. Factor in:

Posting to first interview: 2 weeks
Interview process: 3-4 weeks
Offer to start date: 4 weeks

That's 10-12 weeks minimum.

Mistake 3: Ignoring Ramp Time

New hires aren't productive on day one:

Engineers: 3 months to full productivity
Sales reps: 3-4 months
Customer success: 1-2 months

Plan accordingly.

Mistake 4: Treating All Roles the Same

A $60K coordinator and a $180K senior engineer need different approval processes. Don't make everything go through the same bottleneck.

Mistake 5: Planning Once per Year

Things change. Markets shift. Plans evolve. Review headcount planning quarterly, not annually.

Key Metrics to Track

Once you have a plan, track these metrics:

Plan vs. Actual

Planned headcount: 50
Actual headcount: 48
Variance: -2 (probably good, means you're being thoughtful)

Budget vs. Actual

Planned spend: $500K/month
Actual spend: $485K/month
Variance: -3% (within tolerance)

Time-to-Hire by Role

Engineers: 85 days average
Sales: 45 days average
Operations: 30 days average

Offer Accept Rate

Overall: 75%
If below 70%, you might have compensation issues

Tools You'll Need

At minimum, you need:

Planning tool: Spreadsheet or headcount planning software
Approval workflow: Email or dedicated approval system
HRIS: Source of truth for current headcount
Budget tracking: Finance system or spreadsheet

Most companies start with spreadsheets. That's fine until about 50 people, then it breaks.

Getting Buy-In

Headcount planning only works if people follow it. To get buy-in:

Involve department heads early: Don't dictate the plan, build it together
Make the "why" clear: This isn't about saying no, it's about saying yes to the right things
Build in flexibility: Plans change, make adjustment easy
Show value quickly: Track one metric everyone cares about and report progress

What "Good" Looks Like

You'll know your headcount planning is working when:

Hiring managers know what roles they can fill this quarter
Finance isn't surprised by headcount costs
Approvals happen in days, not weeks
You hit 90%+ of your hiring plan
Your actual spend is within 5% of budget

Next Steps

If you're just getting started:

Document your current headcount and costs
Meet with department heads to understand their hiring needs
Build a simple plan for the next quarter
Define an approval process (keep it simple at first)
Review progress monthly and adjust

Don't try to build the perfect system on day one. Start simple, learn what works, and improve over time.

Headcount Planning 101: A Beginner's Guide